Brazil Strengthens Competitiveness in Chinese Corn Market in 2023
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China’s Corn Production Remains Insufficient for Domestic Market
China is the world’s second-leading Corn producer after the U.S. reaching a record 273 Mmt in MY 2021/2022, 12 Mmt higher YoY. However, domestic consumption reached 291 Mmt, With a 6 Mmt increase YoY, exceeding local production by 18 Mmt. In MY 2022/2023, the USDA estimates a 2 Mmt decrease in production due partially to a 0.3 Mha decrease in harvested area. At the same time, the USDA forecasts that domestic consumption will increase by 4 Mmt YoY, and exceed production by 24 Mmt. Despite China being a large Corn producer, production is insufficient to cover the market demand. As a result, China is the world-leading Corn importer.
Figure 1: China’s Corn Production & Domestic Consumption (MY 2019/2020 – 2022/2023)
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China’s Corn Imports Rose by 0.95 Mmt YoY as the Start of MY 2022/2023
China’s Corn imports reached 20.5 Mmt in MY 2020/2021 when domestic consumption exceeded local production by 24 Mmt. In MY 2021/2022, imports declined by 7.8 Mmt YoY, partially due to domestic consumption exceeding production by only 18 Mmt and Corn shortages in Ukraine. At the beginning of MY 2022/2023, China’s Corn imports reached 9.2 Mmt between Oct 2022 and Jan 2023, 0.95 Mmt higher YoY. As the USDA estimates production will decrease by 2 Mmt in MY 2022/2023, exports will increase YoY. Which exporting markets does China rely on for Corn imports?
Figure 2: China’s Corn Imports (MY 2020/2021 – Oct to Jan MY 2022/2023)
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China Turns to Brazilian Corn in Early MY2022/2023
China’s major Corn exporter in MY 2021/2022 was the U.S., with 14.7 Mmt. Yet, they were 5.8 Mmt lower YoY, due partially to the US total Corn exports decreasing by 6 Mmt YoY in the same MY. Similarly, Ukrainian Corn exports to China declined by 1.7 Mmt YoY, primarily between March and July, when the Russian war in Ukraine began. At the beginning of MY 2022/2023, China’s imports decreased by 66 kmt between October 2022 and January 2023 from the U.S. and by 1.14 Mmt from Ukraine. Yet, they increased by more than 2.2 Mmt YoY from Brazil. Are Brazilian Corn prices more competitive than the U.S.?
Figure 3: China’s 3 Top Corn Suppliers (MY 2020/2021 – Oct to Jan MY 2022/2023)
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U.S. And Brazilian Corn Prices Are Down in Early 2023
U.S. Corn CFR prices to China averaged lower than Brazil’s before May 2022. In Oct 2022, U.S. prices exceeded Barzil’s by USD 59 /mt, the highest difference in 2022. In March 2022, CFR prices from Brazil and the US to China peaked at USD 439/mt and USD 428/mt on average, respectively. After that, Brazilian prices declined to a low of USD 313/mt in Dec 2022. In Jan 2023, Brazilian prices decreased by USD 18 / mt YoY, USD 3/mt lower than in Dec 2022. Meanwhile, U.S. corn CFR prices are USD 5/mt higher YoY in Jan, USD 7/mt lower than Dec, and remained USD 15 /mt higher than Brazilian CFR prices, on average. Overall, corn prices for 2023 are down and will continue to decline for the rest of the year.
Figure 4: The U.S. and Brazil’s Corn CFR Prices to China (2022 and Jan 2023)
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In a Nutshell
China is a world-leading producer of Corn. However, it needs to supply the domestic market. Therefore, China’s Corn supply relies on Imports, primarily from the U.S. and Ukraine.
China’s Corn imports in 2022 decreased partially due to increased domestic production. The war in Ukraine contributed to this decrease due to raw material shortages, as Ukraine and Russia, important Corn exporters, limited their supply due to the war.
In early 2023, China’s Corn imports reached 2.3 Mmt from Brazil (over 25%) of its total imports. Meanwhile, they decreased from the U.S. and Ukraine.
Brazil increased Corn production by 12 Mmt YoY in MY 2022/2023 (CONAB), and exports reached 5.65 Mmt In Jan 2023, 2.8 Mmt Higher YoY. Therefore, Brazil’s strong competitiveness and large production contributed to the decline in global corn prices.
